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Ep 51: Reading Stock Charts is Like Studying Footprints

September 3rd, 2015

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Welcome to the Rapid Recap it is September 3rd 2015 so welcome to September as we conclude the summer months. Now more trading volume should pick up. We have the school season that started more people are probably back into the rhythm starting in the next couple of weeks and then we'll have the holidays approaching which sentiment always tends to be a little more positive.

There's usually a more positive spirits as we approach into these winter months so this week's Rapid Recap the topic of discussion is about reading Stock Charts is Like Studying Footprints.

We're going to cover a handful of stocks and the ones that we’ll cover let me just pull out this Trello so this week we'll be covering the S&P, the Dow Jones and we’ll talk about Apple, Halliburton, Solar City. AMTD, GoPro and SUNE.

We talked about GoPro in the past Rapid Recap we also talked about in the critical charts and it's moving really well to the short side along with Apple and a few others. I'm only covering a handful of these because for the sake of simplicity and also that many more and other charts are listed in the critical charts so my goal this week is of course the lesson and will cover a couple of charts but if you want more in depth charts and more stocks then they'll be in the critical charts over there that I posted just the other day.

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Let's start out with the overall market how things are going what's happening and what's going on with the Dow Jones and the S&P. If we take a look at the overall market we take a look at the weekly this was our critical line right here the line of support or the line in the sand as they say and this line was broken. Now if we do a breakdown on a day-by-day the line broke we had a couple of days of follow-through then we talked about last week that it was possible I said it was possible that it could come back to retest this level.

If it did that if it came back to retest this level or showed any sign of weakness then you would see me shorting the stock. Now it didn't get all the way as high and what does that mean? If it doesn't get as high it to come back higher here and then reject what does that mean? It means that the market was even weaker than I anticipated or even hoped. So what does that mean? Does that mean I don't take the trade nor do I still take the trade.

Well, if I see weakness coming in I noticed and I was planning for a second selloff, watch the previous Rapid Recap watch that Rapid Recap on the market from last week. Watch that Rapid Recap and I discussed it very clearly i think it’s a forty minute video where I gave you some contingency plays that if the market came back up here and then rejected it I would short the stocks again or I would short the market.

If it came back here powered through and there was weakness sideways then I would wait for it to short again. Now if we powered really high really fast then chances are it would sell off again because it would go up too fast too quick so there's a lot of different contingencies that I talked about now when the market doesn't go up as high as you anticipate this means that there's even more weakness.

The market if we look at it right here it bounced on 826 with two hundred and 7.9 million shares then we did 171.5 million on the next day so that was on 827 so we had two hundred and seven million and then we had a hundred and seventy one million then we kind of isolated didn't fully rollover but you can see weakness it didn't continue moving higher we moved sideways basically on Doji idling at 131 million.

We continued lower started to pick up speed to the downside as you can see we had a little bit of a longer spread you're watching this spread. What's the difference between the open and close? Here we had a hundred and forty you 1,000,000 little more than the average then we had a hundred and seventy one point three million which is where our next selloff came and we picked up speed what does that tell me?

Well if I compare it 171.5 versus a hundred seventy one point three and then in the past we did 295 and 293 that means that when we came down to this level and we bounced even though right now it's not selling off on heavy volume it's not ready yet to continue the sell-off but it's not ready to go higher so where am I positioned?

I’m positioned on short still and the reason is because these little pops you don't buy into them because of this rolling over effect.

Notice how it's rolling over and selling off further. So now what's happening the last couple of days what's going on and what's happening again well now the last 92 we had a slight bounce ok we had a slight bounce here in the market and now it wasn't really slight when you look at the points I mean it was about two to three hundred points right there but then today what we did was we powered higher and we sold back off evening just 20 points.

Again idling sideways it's basically a Doji that tells me strength is not there and volume is weakening so look at this look at what's happening in the last three trading days. We had on 9-1 a hundred and seventy one point three million shares to the downside 171 note that number hundred seventy one million.

To the upside we had a hundred and thirty-three and now today we had 87. What does that tell you? Does that tell you that this move is powering higher? Does it tell you that it's building for lower prices?

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It's telling me it's building for lower prices and we talked about the plan. Now if you don't like that chart you like the S&P 500 fine look at this right here so here same concept. We have critical support line stocks fell off, we sell off on 343.7 we sell off on 506 million shares, we sell off on 368 so let's say 500 and 370 and then we bounced on 826 on 339, 339 versus 368, 339 or 368 on the sell-off which one's bigger? The selloff 368 then we pop again on 827, 273 million shares compared that to 506 compare that to 368 compare that to 343 we had 273.

Definitely more on the short side, you’ve got to remember people are positioned differently so they're taking some profits then what happened on 828, 160 million compare that to 368, 506 million or 343. 160 million versus 343 which ones going to win? The Bears then we roll back over 160 million its building its building for that role over 160 million versus 160.4 million so got a 160.5 short, 106.4 to the upside.

Then you compare it also over here 506 million, 343. We’re looking over here now. Next day 91, 254.1  million shares fell off versus what do we have to the upside 273, 339. We have 160 and here we have 254, big difference here when you start comparing these who's winning out when you're looking at the individual trade. Now again we have 159 to the upside just the previous day. 254 to the downside 159  versus 254 which one's bigger? 140 versus 254 versus 368 versus 506 versus 343.

Now this is just a basic guideline of overlooking things in reality I look at the actual physical numbers in more detail calculated and I'll share that with you in the future course because it gets more complicated than this but hopefully just looking at this perspective without making it too confusing you get the point that if you look at the previous couple of bars here on the daily 343.7 versus this one of 273.

You understand that to the downside there is more action so now what happened today as we look at the volume what's going on a 10 minute. We bounced higher and then the rest of the day we continue to sell off and at the end of the day look at what's picking up 8.4 million shares down we're bouncing on 6.4 and then another 8 million selling off.

That means people are selling their shares. Now I still could and I'm prepared for stocks to bounce and still continue to retest this level right here and that is simply because it happens operators and market makers and everything they take these stocks higher and they’ll take it higher to milk this. They’ll milk it but normally right now looking at the overall picture these are acting weak this stock market is still acting weak.

Whether we look at the S&P 500 look at that bar there's the Doji right there that dragonfly doji or gravestone doji right here. Take a look at it, we popped higher and then we have the sell off the rest of the day they're selling so pay close attention of what's happening and where the energy is where is the energy.

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As we look at stocks and you start looking at the market I’m going to use this example of footprints so here we are looking at these footprints and it's a picture off the internet and you can see that one set of footprints is little bit more shall we say it's a little bit more funky and has a different kind of curve.

We have a slight curve to this footprint, the other footprints are pretty much kind of straight they continue moving straight so these footprints tell a different story, this person over here walked in a different fashion so they walk in a little bit more of a curvature fashion. These footprints’ said that this person walked in a more straight and perfect linear fashion.

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All these footprints are going to tell you different things as you evaluate charts as you evaluate things and that's what stocks charts do is looking at the chart they share with you footprints whether that that's a stock chart that's moving in this fashion then you know the person is either party pretty bad at walking or maybe they're just having fun and running around like kids or they have some kind of footprints that go like this circular and again it shares with you a new or different story, the way that they walk.

You need to start paying attention to what the chart is telling you. Now because you’re experience in how people walk you know that some people walk like this other people swivel little more, some people they do a little, they might be skipping and doing little skips through the sand where there's space there's one foot print one footprint.

Some people might be doing a double jump where you have two feet here, two feet here, two feet here so they might be going through the sand in different ways but all these things give you clues give you clues gives you insight to how stocks move.

They give you clues to how things are behaving and if you're new to the market, if you're new to trading, if you're new to charts you might not know these things because you don't understand how stocks walk, you don't know how they breathe, you don't know the pace, you don't know if it's doing a jumping jack, if it's doing a dive off of a cliff, if it's doing a lot of different things.

You have to be mindful and understanding about these different footprints that these charts are making and if you're able to see these footprints you're able to spot what's going on and what's happening with these footprints you'll be able to better predict future prices.

In here looking at the S&P 500 if you know and understand the footprints right here was our sell off boom stock goes down. My foot print from my understanding of reading footprints I see that this pop happened I was already preparing for it last week for that pop and for the next leg down. Now right now it's still not a lot of sell coming in but I'm still preparing that if this builds sideways let's say six weeks this way that this market could continue to sell off further.

If we take a look at this this way right here if we go just six weeks right here consolidate for a bit of time and we break some of these key patterns right here. We could roll off even further. Can that happen?

Absolutely what it mean the market is unhealthy no because if 50% selloff right back here which we talked about before coming back to hear and bouncing would still mean everything is fine.

This is just a digestion period, a period to digest to pull back and it's a great thing because it creates new chart patterns it creates new opportunities. We can even just come back right here to the 200 day moving average on the weekly and bounced right here at this level so we can do a smaller pullback but if we do get a pullback then you can expect that I would add to the position.

We're already short but if we bounce higher and right here this bounce and sell off created a new resistance point for you. Now this is a resistance point and this is a resistance point so if we get to this level you could see more selling coming in. If we break through it you’re still watching this level and then again another short opportunity but to me the footprint still show me that this is a bearish move to the downside, that's what it's building for.

Always be mindful and be prepared to how and what your stock is doing .

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Moving on to individuals stocks got a lot of lines here and let me just simplify things and start fresh with Apple we talked about this for months I’ve talked about it and this whole trade is really on the recaps to the critical charts. I’m trying not to bid on it too much because this was the big winning trade of the year for us but right here you have the resistance here you have resistance here this was the initial swing point here is the selloff, there's another sell-off.

You could have shorted it right there and even if you got in late at this point you would awaited right here you probably would have gotten in right here and then you got stopped out because the stock went higher if you would have waited there.

Next opportunity could have been on this bounce here which you knew the stock was weaker there's the selloff off that moving average of the twenty day could have shorted there or been even safer and waited it here and got in right there. Now this stock continue to move lower and continue to pop higher reject prices and sell off further.

Let’s zoom in a little bit so here then we sold off pop again higher rejected it didn't even make it similar to how the market is doing, rolled over so we're starting a rollover there's that c-shaped kind of pattern coming in rolled over sold off bouncing higher and now again we’re rolling over on higher volume starting to pick up.

Look at the previous day right here we have a 76.7 million and then we bounced on 61 million, 76 million versus bouncing on 61 million which one do you think is going to win now and today we had another selloff day on this stock so where do you look at it now it's creating more support and resistance levels you’re looking at some swing points here.

If you're looking at some minimal things but really right there at the upper level is your resistance line right there but if you want a smaller one you're watching this level right here which is another adding opportunity to your short which is what we talked about was right up here and also now you have this opportunity where the stock is idling it could idle here for 4 to 5 days there's nothing wrong with that and then still I’m on the camp that it's acting weak until it proves to me otherwise.

Once it proves to me otherwise that its strong then I will change my analysis but for the time being if something is sick then you know if it's coughing if it's breathing not right then it's sick. A fact is fact to me that's why it's acting weak. If the leg is broken it takes time for it to recover if you have pneumonia then it takes time to recover then you have pneumonia you are sick.

The same thing here if the stock is acting weak you call it as it is and it's acting weak so these bounces I don't buy into that instead I'm waiting for resistance lines and adding to the short and once they break short you take some profits they bounce again.

Here's what you do they break short you take some profits they pop higher you put those shares and get ready to pull the trigger to go short again so as they start going short you go short again with those shares that you took profits down here and as they break lower again you take more profits.

If they break certain critical lines or the critical levels critical supports you add to that short even more so you're playing this game of Risk Reduction. That's what this business is all about it's about a couple of things.

Number one it's about probabilities, number two it's about risk management, it’s about money management, it’s about being patient it has a lot of key points that most people don't grasp but you really have to take profits in order to capitalize on winnings you have to take some profits so there you go there's Apple acting weak still short side.

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Here we go on Halliburton look at this you have a few critical swing points its building for lower prices it is building, setting things up watch it closely here's our previous one point right there we discuss that one before in the past I'm pretty sure I remember it. Going lower now and if we break this line on heavy volume again great place to step in and here is our ABCD pattern for those of you that are watching the ABCD pattern. Here's your A here we have a B here’s kind of your C and here's your D.

If you want to look at this on a bigger scale here's your bigger A so that's an ABCD pattern so here's an A to B, B to C on a larger scale, the D will be down here so that will be your D so let me clear that and maybe give you a better perspective, A to B, B to C, C to D. That's how that'll look with the pattern of course you have that smaller ABC do with them, you could have traded that one as well beautiful set up.

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Solar City again getting ready for the set up its bounce a little bit right now so I would be patient on this one but you’re still watching this lower level on this line it could come back up to this level so this one may take a few days could take a few weeks but you're still waiting for this line to break but it could snap at any time you don't know you just set an alert and watch, if it breaks heavy volume you get in it on the short side.

Look at that cluster right there showing you a good cluster of bearish bars. We did have one bar popping in higher on that week but usually these things take time to digest so if it’s able to hold this level then you know all bets are off and then you're just waiting but if things break lower if things  selloff right here at this level then you're just going short and then take your profits as we approach that $35 level and see how it continues.

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Looking at AMTD, this one on the weekly long trend line looking at the daily still long trend line here is your support line stock broke right there and there was your short, entry right here looks good for lower prices you could have gotten in its second day or third day even now on the pop right here just like any other stocks here's your footprint comes back to the retracement and then what happens? What happens next?

Wells we sell off again we’re starting to pop and then we're acting weak on that pop so what does that tell me? Tells me the stock is acting weak.

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GoPro love this one, another big trade right here. We talked about this one right here long resistance line long support resistance line had a huge break at this level so this was our initial break came back rejected it here didn't even make it over here came back here isolated it for or idled for a little bit up top didn't have the due sold off that’s your opportunity to go short.

Stock continues to go short and now we have a critical swing point right here if it breaks this line here because we have a few critical areas that's your next opportunity to go short you're waiting for this line to break. If you're not in its short now you don't get it now because you're late to the party. The shorting opportunity was up here or really even down here.

Now as we get into this level you're already kind of late to the party so if looking at the daily look how many days you had an opportunity to get in short. You had multiple days to get into this stock short.

You had one of the first ones here stock powered higher here's another one huge wide price spread on that bar, wide bars stock continued lower than we had a bounce there's the bounce then what we do reject it, we reject it and volume is look picking up to the short side. We reject it there you had let's see 1,2, 3, 4, 5, 6, 7 seven days almost a whole week of trading to go short this stock and then we break also the 200 day moving average right there keys sign so even if you got into the stock late right there after the 200 day moving average you still would have been up 12 14 15 points right there.

If you had a hundred shares 15 points you can do the math if you had a thousand shares how much money would that be? Now as we approach this you should be taking your profits here's the line this Is the critical point as we approach this take some profits. Looking at this just from my sheer hypothetical point of view hypothetically this stock is acting weak and it's picking up speed to the downside so my guess is that it'll break this line.

That is my educated guess and prediction. Does that mean I’m not taking profits? No, that means I'm still taking profits but being ready to add to the position again just in case because it could turn around here bounce a little lower fake you out and pop higher and get 250 again so I still want to make sure I take some profits at this level and then be patient and see if it breaks.

If I'm more confident that it's going to break which on this one I am more confident then I may take less profits but I'm still taking some profits and then I raised my stop and I raise my stop to here or here you know but if it breaks this line and it breaks this level to go lower then I'll raise my stop to possibly right around that $40 level because you're in profit you're a huge win you know you're up here really where were all the way up here at the $21 level. You could be up here at the $20 level.

Even if you're late you'd be at up to $12 you’d be up $12 in this stock and that's if you're late so look at it, it’s approaching this level watch these lows more than likely it's going to clear but be mindful talked about this one in our previous August 27th Rapid Recap critical charts and a lot of other things so watch that one.

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Last one I want to discuss is SUNE long run upper trend lines that break on heavy volume is a key. It is your footprint it is a big footprint. When a stock is at its high and you know if we look at this stock on the monthly chart this really tells me the longer picture. You would have thought this stock was really powering higher but looking at the monthly you can see an 08 really these are the highs.

Already I know that this stock was acting weak back here in 09. It's not at its highs over here at ninety but I know that we have a lot of weakness here. So as we’re approaching these levels over here in getting into this bar, this region, there's going to be some weakness. So as we start zooming in you can say let's get rid of that we know ok the stock has been weak before but now we start getting into more let's say a little more intermediate things.

Here’s our a pattern, here is our B, here’s our C and we think it's going to go higher and we’re nearly reaching our projected D move but you have to remember the bigger picture that this stock has overhead resistance and has that lot of volume there in the past over back there.

When we start coming into higher prices and getting close to that D level and then you start seeing this major bar kick in and then you start seeing another one by the third one with heavy volume you know more selling is coming and if we go to the weekly you can see if we go to the daily you can see that the volume is picking up you had one day, two days, three days and four days here four to five days then six days and then after the 200 day moving average broke yet more days.

You had a few weeks right here to get into the stopped short and then we moved down twelve points for 825, $30 stock. You had a lot of time and a lot of opportunity to see these things but you wouldn't have known that if you didn't look at all the footprints looking at the footprint what is that footprint telling me what is that stock telling me.

When you start looking at things like this when you start valuating charts in this way when you start looking and knowing how things move how things react that’s when you get better at predicting charts and there was a few people that really applauded me and thanked me for a lot of the charts that I do because they really feel good about the way that I explained it.

For me over time it comes natural and it now it's not really about me my analysis is going to be very similar from day today and that's why we do the recap just once a week because most of these things apply for multiple weeks at a time so for me I’m looking to contribute to make sure you understand and how do you get to read these footprints better it’s kind of like how do you get to read murder cases, better how do you get to read all the different fingerprints better or how do you get to read some people that learn how to do penmanship or signatures or autographs and really read and learn the art of spotting fake signatures.

How do they get to be that way how did they get to see these things and that is through practice, it is through studying, it is through putting in the time, putting in the effort and the energy into these things and that just simply takes time but I wanted to share with you some insight that this is really a business about learning how to read things. It's about learning how to listen and be disciplined and be aware of what's happening and a lot of people like to be dishonest with themselves.

They don't want to admit to what's happening with the market because they're in positions we get clouded by the judgments then that is because of the psychology that affects.

We're in the position we get more emotional we get tied into it. So you need to step away and be aware of what's happening to you personally or just be mindful and honest with your different trades with your different stocks look at it on a non-emotional basis and look at what's going on with the fingerprints, what's going on with the footprints of that stock and where is it moving, how's it moving. Is it jumping up and down with two feet not going anywhere? Is it just rocking side to side?

Start learning the pace learning to rhythm and then you become better at it and that just takes time it just takes time in the market it takes practice of looking and reading charts studying charts and you'll get better with time so put the time put the energy put the effort and that's one of the reasons why I like looking at charts I do the critical charts that helps me become better and doing the books for example also helped me become better.

For example that two 245 money-making stock charts that we have the book series and we have the Penny Stock books coming out soon probably in the next couple months here.

All those things really just help me read and get better at charts. I study more and more charts so even though we post 245 charts I don't know if you realize this but I probably looked at over two to three thousand charts by the time I choose those 245 charts that go into that and I look at their past, the different years so I'm looking at maybe four to five thousand different charts to make that one book and that's where you become better that's where you become good.

It's just one of those things that just takes time and if you study things you study and you practice it you too become better.

Thanks for joining me in this week's Rapid Recap. I know we didn't do a lot of stock charts specifically but they are in the critical charts but looking at some of the stocks you see the GoPro great shorts worked out well.

SUNE as well, Dow Jones still acting weak. We got S&P also acting weak, we popped higher then sold off so that tells me there's weakness, Apple as well.

Looking at the big boys Netflix also pushing down on this level also acting weak get ready for another shorting opportunity if this one breaks that line. Amazon you also have a few levels that you're playing in right there so be mindful a lot of these stocks especially these bigger companies once they break a lot of the other stocks tend to follow and you know remember the leaders lead the market lower and the leaders lead the market higher.

If these are selling off the rest of the market usually comes with it with time.

Enjoy the rest of the week. I hope things are going great with you starting the school season if you have kids. We have holidays approaching coming up in the next couple months so if you have new year goals that you set last year take a look at those, evaluate those and be prepared because time is running out and try and reach those goals if you haven't worked on them and maybe new things will follow and new good things will come if you put the time and effort into those goals.

Thanks again for joining me and I'll see you next week.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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